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to enable us, first, to satisfy our financial obligations and, second, to make distributions to our common shareholders. The ability |
of our businesses to make payments to us may also be subject to limitations under laws of the jurisdictions in which they are incorporated |
or organized. If, as a consequence of these various restrictions or otherwise, we are unable to generate sufficient cash flow from our |
businesses, we may not be able to declare, or may have to delay or cancel payment of, distributions to our common shareholders. In addition, the put price and profit allocation |
will be payment obligations and, as a result, will be senior in right to the payment of any distributions to our shareholders. Further, |
we are required to make a profit allocation to our manager upon satisfaction of applicable conditions to payment. See Item 1 “ Business—Our |
Manager—Our Manager as an Equity Holder ” for more information about our manager’s put right and profit allocation. Our loans with third parties contain certain |
terms that could materially adversely affect our financial condition. We and our subsidiaries are parties to certain |
loans with third parties, which are secured by the assets of our subsidiaries. The loans agreements contain customary representations, |
warranties and affirmative and negative financial and other covenants. If an event of default were to occur under any of these loans, |
the lender thereto may pursue all remedies available to it, including declaring the obligations under its respective loan immediately |
due and payable, which could materially adversely affect our financial condition. See Item 7 “ Management’s Discussion |
and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources ” for further discussion |
regarding our borrowing activities. In the future, we may seek to enter into |
other credit facilities to help fund our acquisition capital and working capital needs. These credit facilities may expose us to additional |
risks associated with leverage and may inhibit our operating flexibility and reduce cash flow available for payment of distributions |
to our shareholders. We may seek to enter into other credit facilities |
with third-party lenders to help fund our acquisitions. Such credit facilities will likely require us to pay a commitment fee on the |
undrawn amount and will likely contain a number of affirmative and restrictive covenants. 46 If we violate any such covenants, our lenders |
could accelerate the maturity of any debt outstanding and we may be prohibited from making any distributions to our shareholders. Such |
debt may be secured by our assets, including the stock we may own in businesses that we acquire and the rights we have under intercompany |
loan agreements that we may enter into with our businesses. Our ability to meet our debt service obligations may be affected by events |
beyond our control and will depend primarily upon cash produced by businesses that we currently manage and may acquire in the future |
and distributed or paid to us. Any failure to comply with the terms of our indebtedness may have a material adverse effect on our financial |
condition. In addition, we expect that such credit facilities |
will bear interest at floating rates which will generally change as interest rates change. We will bear the risk that the rates that |
we are charged by our lenders will increase faster than we can grow the cash flow from our businesses or businesses that we may acquire |
in the future, which could reduce profitability, materially adversely affect our ability to service our debt, cause us to breach covenants |
contained in our third-party credit facilities and reduce cash flow available for distribution. We may engage in a business transaction |
with one or more target businesses that have relationships with our executive officers, our directors, our manager, our manager’s |
employees or our manager’s operating partners, or any of their respective affiliates, which may create or present conflicts of |
interest. We may decide to engage in a business transaction |
with one or more target businesses with which our executive officers, our directors, our manager, our manager’s employees, our |
manager’s operating partners, or any of their respective affiliates, have a relationship, which may create or present conflicts |
of interest. Regardless of whether we obtain a fairness opinion from an independent investment banking firm with respect to such a transaction, |
conflicts of interest may still exist with respect to a particular acquisition and, as a result, the terms of the acquisition of a target |
business may not be as advantageous to our shareholders as it would have been absent any conflicts of interest. The operational objectives and business |
plans of our businesses may conflict with our operational and business objectives or with the plans and objective of another business |
we own and operate. Our businesses operate in different industries |
and face different risks and opportunities depending on market and economic conditions in their respective industries and regions. A |
business’ operational objectives and business plans may not be similar to our objectives and plans or the objectives and plans |
of another business that we own and operate. This could create competing demands for resources, such as management attention and funding |
needed for operations or acquisitions, in the future. If, in the future, we cease to control |
and operate our businesses or other businesses that we acquire in the future or engage in certain other activities, we may be deemed |
to be an investment company under the Investment Company Act. We have the ability to make investments in businesses |
that we will not operate or control. If we make significant investments in businesses that we do not operate or control, or that we cease |
to operate or control, or if we commence certain investment-related activities, we may be deemed to be an investment company under the |
Investment Company Act. Our decision to sell a business will be based upon financial, operating and other considerations rather than |
a plan to complete a sale of a business within any specific time frame. If we were deemed to be an investment company, we would either |
have to register as an investment company under the Investment Company Act, obtain exemptive relief from the SEC or modify our investments |
or organizational structure or our contract rights to fall outside the definition of an investment company. Registering as an investment |
company could, among other things, materially adversely affect our financial condition, business and results of operations, materially |
limit our ability to borrow funds or engage in other transactions involving leverage and require us to add directors who are independent |
of us or our manager and otherwise will subject us to additional regulation that will be costly and time-consuming. We have identified material weaknesses |
in our internal control over financial reporting. If we fail to develop or maintain an effective system of internal controls, we may |
not be able to accurately report our financial results and prevent fraud. As a result, current and potential shareholders could lose |
confidence in our financial statements, which would harm the trading price of our common shares. Companies that file reports with the SEC, including |
us, are subject to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or SOX 404. SOX 404 requires management to establish |
and maintain a system of internal control over financial reporting and annual reports on Form 10-K filed under the Securities Exchange |
Act of 1934, as amended, or the Exchange Act, to contain a report from management assessing the effectiveness of a company’s internal |
control over financial reporting. Separately, under SOX 404, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection |
Act of 2010, public companies that are large accelerated filers or accelerated filers must include in their annual reports on Form 10-K |
an attestation report of their regular auditors attesting to and reporting on management’s assessment of internal control over |
financial reporting. Non-accelerated filers and smaller reporting companies, like us, are not required to include an attestation report |
of their auditors in annual reports. 47 A report of our management is included under |
Item 9A. “ Controls and Procedures ”. We are a smaller reporting company and, consequently, are not required to |
include an attestation report of our auditor in our annual report. However, if and when we become subject to the auditor attestation |
requirements under SOX 404, we can provide no assurance that we will receive a positive attestation from our independent auditors. During its evaluation of the effectiveness of |
internal control over financial reporting as of December 31, 2022, management identified material weaknesses. These material weaknesses |
were associated with our lack of (i) appropriate policies and procedures to evaluate the proper accounting and disclosures of key documents |
and agreements, (ii) adequate segregation of duties with our limited accounting personnel and reliance upon outsourced accounting services |
and (iii) sufficient and skilled accounting personnel with an appropriate level of technical accounting knowledge and experience in the |
application of GAAP commensurate with our financial reporting requirements. We are undertaking remedial measures, which measures |
will take time to implement and test, to address these material weaknesses. There can be no assurance that such measures will be sufficient |
to remedy the material weaknesses identified or that additional material weaknesses or other control or significant deficiencies will |
not be identified in the future. If we continue to experience material weaknesses in our internal controls or fail to maintain or implement |
required new or improved controls, such circumstances could cause us to fail to meet our periodic reporting obligations or result in |
material misstatements in our financial statements, or adversely affect the results of periodic management evaluations and, if required, |
annual auditor attestation reports. Each of the foregoing results could cause investors to lose confidence in our reported financial |
information and lead to a decline in our share price. Risks Related to Our Retail and Appliances |
Business If we fail to acquire new customers or |
retain existing customers, or fail to do so in a cost-effective manner, we may not be able to achieve profitability. Our success depends on our ability to acquire |
and retain customers in a cost-effective manner. We have made significant investments related to customer acquisition and expect to continue |
to spend significant amounts to acquire additional customers. We cannot assure you that the net profit from new customers we acquire |
will ultimately exceed the cost of acquiring those customers. If we fail to deliver a quality shopping experience, or if consumers do |
not perceive the products we offer to be of high value and quality, we may not be able to acquire new customers. If we are unable to |
acquire new customers who purchase products in numbers sufficient to grow our business, we may not be able to generate the scale necessary |
to drive beneficial network effects with our suppliers or efficiencies in our logistics network, our net revenue may decrease, and our |
business, financial condition and operating results may be materially adversely affected. We believe that many of our new customers originate |
from word-of-mouth and other non-paid referrals from existing customers. Therefore, we must ensure that our existing customers remain |
loyal to us in order to continue receiving those referrals. If our efforts to satisfy our existing customers are not successful, we may |
not be able to acquire new customers in sufficient numbers to continue to grow our business, or we may be required to incur significantly |
higher marketing expenses in order to acquire new customers. Our success depends in part on our ability |
to increase our net revenue per active customer. If our efforts to increase customer loyalty and repeat purchasing as well as maintain |
high levels of customer engagement are not successful, our growth prospects and revenue will be materially adversely affected. Our ability to grow our business depends on our |
ability to retain our existing customer base and generate increased revenue and repeat purchases from this customer base, and maintain |
high levels of customer engagement. To do this, we must continue to provide our customers and potential customers with a unified, convenient, |
efficient and differentiated shopping experience ● providing imagery, tools and technology that attract customers |
who historically would have bought elsewhere; ● maintaining a high-quality and diverse portfolio of products; ● delivering products on time and without damage; and ● maintaining and further developing our in-store and online |
platforms. If we fail to increase net revenue per active |
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